WORKSHEET 1

# WORKSHEET 1 - 300 \$25.00 900 2007 \$1.50 1600 \$570.00 340...

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WORKSHEET 1 Recitation for Economics 2020-300 – Principles of Macroeconomics Spring 2008 1) Define GDP: 2) List and explain each component of GDP: 1

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3) Suppose that an economy produces only three goods: potato chips, LCD televisions, and DVDs. Use the table below to compute: a) Nominal GDP for the years 2005, 2006, and 2007. b) Real GDP for the years 2005, 2006, and 2007. c) GDP deflator for the years 2005, 2006, and 2007. Table 1: Year Price of a bag of potato chips Quantity of bags of potato chips Price of LCD televisions Quantity of LCD televisions Price of DVDs Quantity of DVDs 2005 \$0.75 950 \$1,000.00 200 \$28.00 870 2006 \$1.00 1025 \$650.00

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Unformatted text preview: 300 \$25.00 900 2007 \$1.50 1600 \$570.00 340 \$20.00 1000 . 2 4) Suppose that the BLS surveys consumers and discovers that a typical consumer spends her income on potato chips, LCD televisions and DVDs. The BLS also determines that the basket for a typical consumer is: Basket: 15 bags of potato chips 2 LCD televisions 10 DVDs Assume the prices given in table 1. Using 2005 as the base year, compute: a) CPI for the years 2005, 2006, and 2007. b) Inflation rate for the years 2005, 2006, and 2007. 3 5) What are the three major problems in using the CPI as a measure of the cost of living? 4...
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WORKSHEET 1 - 300 \$25.00 900 2007 \$1.50 1600 \$570.00 340...

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